POSSIBILITY OF PROXY


[This is my write up published in July 2014 edition of eMagazine of Mysore Chapter of Institute of Company Secretaries of India
Download here: 126 ICSI Mysore eMagazine July 2014]

Section 105(2) of the Companies Act, 2013 says in every notice calling a meeting of a company, there shall appear with reasonable prominence a statement that member entitled to appoint a proxy and a proxy need not be a member. Prominent question on ‘proxy’ is where the institution of proxies stands under new corporate law regime.

According to first proviso to Section 105(1) a proxy shall not have the right to speak at such meeting and shall not be entitled to vote except on a poll. Unless there are poll, there will be no prominence for proxy like in the Companies Act, 1956. Section 107 says at any general meeting, a resolution put to the vote of the meeting shall, unless a poll is demanded under section 109 or the voting is carried out electronically, be decided on a show of hands. Section 106(3) say, on a poll taken at a meeting of a company, a member entitled to more than one vote, or his proxy, where allowed, or other person entitled to vote for him, as the case may be, need not, if he votes, use all his votes or cast in the same way all the votes he uses.

Section 108 empowers Central government to make Rules for electronic voting for passing of certain resolutions. Accordingly, Rule 20(1) enumerates companies where electronic voting shall take place. Every listed company or a company having not less than one thousand shareholders shall provide, to its members facility to exercise their right to vote at general meetings by electronic means. The term “shall” denote mandatory electronic voting in these companies. These companies shall use electronic voting for all kind of resolutions. These rules do not differentiate between ordinary or special business. The very nature of electronic voting facilitates a member of a company to vote on a resolution, to vote from anywhere. When a member can vote from anywhere, why will there be a need to appoint a proxy? Even though all companies need to permit appointment of proxies, members of companies under compulsory electronic voting, practically have no need to appoint.

Further, proviso to Rule 22(16) dealing with postal ballot under Section 110 of the Companies Act, 2013 suggest provisions relating to postal ballot shall apply to all companies having two hundred or more members. According to this Rule, postal ballot means voting by post or through electronic means.

As per Section 110 of the Act, every company shall transact businesses notified by Central Government through postal ballot only and not in general meeting. Companies may transact any business through postal ballot except –

(i)           ordinary business in an annual general meeting; and

(ii)          business in respect of which directors or auditors have a right to be heard at any meeting.

Rule 22(16) lists following item of businesses to be transacted only by means of voting through a postal ballot-

(a)  Alteration of the objects clause of the memorandum and in the case of the company in existence immediately before the commencement of the Act, alteration of the main objects of the memorandum;

(b)  Alteration of articles of association in relation to insertion or removal of provisions which, under sub-section (68) of section 2, are required to be included in the articles of a company in order to constitute it a private company;

(c)   Change in place of registered office outside the local limits of any city, town or village as specified in sub-section (5) of section 12;

(d)  Change in objects for which a company has raised money from public through prospectus and still has any unutilized amount out of the money so raised under sub-section (8) of section 13;

(e)  Issue of shares with differential rights as to voting or dividend or otherwise under sub clause (ii) of clause (a) of section 43;

(f)   Variation in the rights attached to a class of shares or debentures or other securities as specified under section 48;

(g)  Buy-back of shares by a company under sub-section (1) of section 68;

(h)  Election of a director under section 151 of the Act;

(i)    Sale of the whole or substantially the whole of an undertaking of a company as specified under sub-clause (a) of sub-section (1) of section 180;

(j)    Giving loans or extending guarantee or providing security in excess of the limit specified under sub-section (3) of section 186.

Thus, combined reading of Section 110 of the Act and Rule 22 of the rules suggests that every company with two hundred or more shall transact certain items with postal ballot or through voting through electronic means and these company may transact all other special  businesses also through postal ballot or through voting through electronic means. All other companies may also transact all its special businesses through postal ballot or electronic voting.

Section 110 of the Act specifically excludes all ordinary businesses and any business in respect of which directors or auditors have a right to be heard at any meeting form postal ballot or electronic voting in those companies. Section 108 being an independent provision does not grant such an exception to listed companies and other companies with not less than one thousand members.

Combined reading of Section 108 and section 110 along with the rules suggests that only in following situations demand of poll may arise:

  1. For all items of ordinary and special businesses to be transacted in general meeting of a company with less than two hundred members which has not opted for postal ballot or electronic voting;
  2. Company with less than two hundred members has selected some businesses to be transacted through postal ballot or electronic voting, in case of all remaining businesses, which are still being transacted in general meeting;
  3. Where a company selected some businesses in addition to businesses listed in Rule 22(16), in case of all remaining businesses, which are still being transacted in general meeting;
  4. Any business in respect of which directors or auditors have a right to be heard at any meeting, whether or not such company has opted for postal ballot or electronic voting.

 Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.

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